Oil prices retreated on Thursday, pulled down by a wave of fresh evidence that global crude demand is softening even as a swollen build in U.S. inventories added to the bearish mood.
The losses came even as traders kept one eye on the Strait of Hormuz, where a lack of diplomatic progress and falling vessel traffic continued to underpin fears of a supply squeeze.
Brent crude futures shed 91 cents, or 1%, to trade at $88.07 a barrel by 0800 GMT, eating into the gains racked up over the previous six trading sessions. U.S. West Texas Intermediate fell in tandem, dropping 96 cents, or 1.2%, to $82.31 a barrel, snapping a five-session rally.
The catalyst for Thursday’s pullback traces back to Wednesday’s inventory data from the U.S. Energy Information Administration, which showed commercial crude stocks jumping by 17.4 million barrels to 424.4 million barrels in the week ended August 7, the largest weekly build since January 2023 and far above the modest 1.4-million-barrel draw analysts polled by Reuters had expected.
Stockpiles now stand at their highest level since early June, driven in part by a slump in exports.
“Crude inventory build in the U.S. kept prices below $90 a barrel,” said PVM analyst John Evans, who also pointed to downgraded demand estimates from both OPEC and the International Energy Agency as compounding the pressure on prices.
Those downgrades were notable in their scale. OPEC, in its closely watched monthly oil market report released the same day, trimmed its forecast for 2026 world oil demand growth to just 580,000 barrels per day, a marked slowdown from earlier projections.
The IEA went further, warning that global consumption could contract by 1.6 million barrels per day this year, a steep revision from the 1-million-barrel-per-day contraction it had forecast only a month earlier.
The Paris-based agency attributed the deepening pullback in demand to elevated prices and supply restrictions stemming from the ongoing U.S.-Israeli conflict with Iran.
Even so, the sell-off was cushioned by persistent anxiety over supply disruptions in the Middle East and the Black Sea. Chief among them: the continued closure, or effective blockade, of the Strait of Hormuz, the narrow waterway through which a significant share of the world’s seaborne oil passes.
A senior Iranian source said Wednesday that talks aimed at reviving an interim U.S.-Iranian agreement struck in June and establishing a concrete timetable for putting it into effect had made no headway. That diplomatic stalemate has coincided with a marked thinning of maritime traffic through the strait.
Shipping data from Kpler showed vessel crossings, excluding container ships, fell to just five on Wednesday, the lowest tally in three weeks.
Adding to the geopolitical backdrop, Russia struck the port area of Izmail in Ukraine’s southern Odesa region overnight, while a drone strike sparked a fire in an industrial zone in Salavat, in Russia’s republic of Bashkortostan, a city that hosts a major oil refinery.
Neither strike was reported to have caused significant disruption to output, but both served as reminders of how exposed regional energy infrastructure remains to the ongoing conflict.
Thursday’s price action illustrates the tug-of-war currently defining crude markets: swelling stockpiles and weakening consumption forecasts pulling prices lower, against a backdrop of geopolitical flashpoints from the Persian Gulf to the Black Sea that traders fear could tighten supply abruptly.
For now, the demand-side data appears to have the upper hand, but analysts caution that any escalation around Hormuz or further attacks on refining infrastructure could quickly reverse the day’s losses.
WHAT YOU SHOULD KNOW
Oil prices fell because bearish fundamentals, a massive U.S. inventory build, and shrinking demand forecasts from OPEC and the IEA outweighed bullish geopolitical risk from the Strait of Hormuz standoff and regional conflict.
For now, oversupply concerns are winning out over supply-disruption fears, but that balance remains fragile and could flip quickly if tensions around Hormuz escalate.
